Life insurance is one component of financial stability. Life insurance provides stability for those that are left behind. Planning ahead and securing life insurance ensures that they are taken care of. This is just one aspect of the many financial services that a person needs for financial stability.
Life insurance provides a financial benefit to a beneficiary if the insured dies. This benefit is one way the insured can be certain that the beneficiary is financially stable even when they are gone. The life insurance policy is a contract between the insurance company issuing the policy and the insured. In return for the payment of regular premiums to the insurance company, the beneficiary of the policy gets a payment when the insured dies. The insurance company is motivated by financial concerns to reach a balance between the amount of money brought in with premiums across all life insurance policies and the money paid out to beneficiaries. The insurance company collects information when a new customer requests a life insurance policy. This information enables the insurance company to properly set the premium payment by assessing the risk of the customer. If, for instance, the potential customer is employed in a high-risk occupation such as race-car driver, the risk to the insurance company insuring them is higher, so, the premium payments will be higher. However, a higher premium payment may mean that the customer does not accept the policy and the company loses that potential business. The company needs to make this balance between lower premiums that attract more new customers, but potentially higher risk and higher premiums that lower the financial risk to the company, but fewer customers.
In addition to life insurance, there are many other aspects of financial stability, such as banking accounts, mortgages, retirement accounts, and brokerage accounts.